A new wave of 100% tariffs on certain patented drugs and pharmaceutical ingredients took effect this week, targeting smaller biotech and biopharma companies that depend on overseas contract manufacturers — particularly in hubs like India and Singapore. The Trump administration framed the move as a national security measure, noting that more than half of branded drug products have at least one manufacturer outside the U.S. This second phase follows an earlier round that hit large drug manufacturers at the end of July.

The administration is offering a lifeline of sorts: three-year full exemptions for companies that sign voluntary "most favored nation" (MFN) drug pricing agreements and commit to onshoring production. Companies that only commit to onshoring face a reduced 20% tariff until 2030. Nine categories of specialty drugs from countries with U.S. trade agreements — including the EU, UK, Switzerland, Japan, and South Korea — are also exempt, and generic drugs are largely spared.

Key Takeaways:

• Over 100 firms have products subject to the new duties and may lack the resources to shift production domestically
• Some smaller firms may respond by merging with or selling products to Big Pharma rather than onshoring
• Higher list prices or lower rebates to purchasers are possible cost pass-through mechanisms
• Legal challenges to the tariffs and their national security rationale are being considered by industry observers

Why it matters: For smaller biotechs — often the engines of tomorrow's breakthrough medicines — these tariffs could divert critical R&D funding, accelerate consolidation, and create unpredictable disruptions to drug availability. The stakes extend beyond business: patient access to specialty drugs could be at risk if companies scale back or exit the market.